The Asia-Pacific region could face higher grain and meat prices after Russia suspended a UN-brokered deal that had allowed safe grain shipments out of the Black Sea.
Over the weekend, the Russian Foreign Ministry said it “can no longer guarantee the safety of civilian dry cargo ships participating in the Black Sea Grain Initiative and will suspend its implementation from today indefinitely.” This followed a Ukrainian attack on its fleet in Sevastopol.
Meat production and consumption are key in Asia, and for many Asian countries grains such as wheat, corn and soybeans are needed for animal feed to produce beef, pork, poultry as well as fish, authors Genevieve Donnellon-May and Paul Teng wrote in a research note published by Singapore think tank RSIS.
Major Black Sea exporters Russia and Ukraine account for about a third of world wheat exports, 15% of world corn exports and about 2.1% of world soybean exports, the pair said, adding that Asian countries are particularly affected because many import from the region.
“For consumers in Asia, expect to pay even higher prices for food, including for meat, because of the protracted conflict along with rising energy costs and inflation,” Donnellon-May told CNBC.
“It will be worse in the Asia-Pacific region with countries affected by higher [priced] fertiliser, fuel and food prices, further exacerbating Covid-related disruptions in supply chains and climate change-induced extreme weather events, which have affected agricultural production and food security.”
“Consumers across the Asia-Pacific region should expect to pay more for basic foods and also for meat.”
1 million tons of less grain on the market can create a price increase of around 0.5%
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Before Russia ended its participation, the Black Sea Grain Initiative had unlocked 9 million tonnes of grain worth $3 billion, said Maximo Torero, chief economist at the UN’s Food and Agriculture Organization.
“In practical terms, that means 1 million tons less grain on the market could create a price increase of about 0.5%. So the short-term impact shouldn’t be too big,” Torero told CNBC’s “Squawk Box.” Asia” on Monday, adding that the longer the situation lasted, the higher prices would rise.
Describing the situation in the Black Sea, Torero said there were 97 loaded vessels waiting to sail, 15 incoming vessels awaiting inspection and another 89 that had applied to join the initiative.
The latest update of the FAO Food Price Index showed that global food prices had fallen for the sixth consecutive month in September. Grain prices also fell, but rose in September on fears of the Black Sea Grain Initiative continuing beyond November.
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